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Federal Budget fails to assist junior oil and gas sector

CALGARY, March 19 /CNW/ - The Small Explorers and Producers Association
of Canada (SEPAC) is disappointed that the federal government has failed to
take the opportunity created today in presenting a new budget to update the
limits on access to flow through share financing for junior oil and gas
producers. Under current outdated limits, only very small producers under a
$15 million capital limit can renounce Canadian Development Expense (CDE) as
Canadian Exploration Expense (CEE) and then only to a limit of $1 million per
year. With rapid cost inflation in recent years this outdated limit often is
reached on a single well.
The federal government also hit oilsands players hard by phasing out
accelerated capital cost allowance by 2015. Wrongly described by critics as a
'subsidy' and with high costs already threatening the viability of many
projects, the loss of this accelerated capital cost allowance may be enough to
cause some oilsands project proponents to reassess their investment plans. The
federal government also made it clear they will not re-visit their decision to
eliminate royalty trusts by December 31, 2015 which has for investors in the
junior oil and gas sector eliminated a key exit strategy.
The junior oil and gas sector is grappling with lower than expected
natural gas prices, high operating costs as well as uncertainty on climate
change policy and provincial royalty rates. The federal government missed an
opportunity to improve the business climate for emerging and junior oil and
gas producers in Canada.
The Small Explorers and Producers Association of Canada represents
"Canada's Oil and Gas Entrepreneurs" with 450 member companies, 80% being oil
and gas producers and the rest suppliers of products and services to the
upstream petroleum industry. SEPAC's members operate almost 20% of the
conventional oil and gas wells drilled each year in Western Canada.